Uncertainty With Federal Budgets Affect IT Contractors

Marie Larsen | January 2, 2014 |

Even though the government shutdown is behind us, the information technology industry, as well as many more fields throughout the nation, is expected to feel further impact continuing into the coming year. With budget deals and negotiations between federal officials, 2014 is predicted to bring a degree of uncertainty for contracted IT professionals.

According to InformationWeek, turbulence resulting from an temperamental political climate has managed to shake the employment situation for government contractors. Not only were they presented with obstacles with the partial shutdown in October, but they have also faced residual issues stemming from continued sequestration.

Government cutbacks reduce IT contractor revenue
​Due to funding cutbacks, public and private IT firms have had to make due with the government financial support available to them. A recent study conducted by Fed Connects found that because of the shutdown and the sequestration, 31 percent of companies with government contracts experienced a decrease in revenue of more than 10 percent this year. Additionally, 30 percent of organizations encountered reductions of up to 10 percent, and 16 percent faced a plateau in terms of business growth.

“It is clear that sequestration and the government shutdown have had a tremendous impact on the government contracting community,” stated Lisa Dezzutti, president and CEO of Market Connections, according to InformationWeek.

In light of these drops in generated capital, contracted firms and workers are now looking into other, more secure avenues so that they can persist despite any fluctuations in government spending. If they consider new, innovative ways that they could use their IT skills in similar, but more stable markets, then they may be able to avoid prolonging any losses due to anticipated cuts to programs relying on the development of tech solutions.

“Contractors, to survive, are being forced to adjust how they provide services to government,” Dezzutti explained. “This means research not only to monitor and understand the needs of customers, but also to assess the competitors. The risk of bidding without this information is significant.”

Making it work with less funding
How exactly are contractors thinking of coping with the possible budget reductions? In that same survey, 45 percent of companies reported that they would be venturing into other markets, while 35 percent stated that they are going to turn inwardly and focus on re-evaluating their bottom lines.

With that said, not every contracted IT organizations is planning on abandoning the federal field. In fact, 40 percent of firms said that they were going to adjust to the revenue losses simply by expanding their federal work, seeking out projects with new agencies and departments.

The organizations trying to attract more federal attention are employing a variety of tactics to improve their chances of securing work. For example, 40 percent of firms are trying to overhaul their proposal processes so that they are more likely to land contracts. On top of that, 39 percent stated that they are expanding the number of representatives they have on staff so that they can increase their business development efforts, while 19 percent asserted that they will be boosting their consulting service offerings.

What’s more, others are looking to secure work with government institutions at various levels. For example, many state and local governments are now looking to take on initiatives to improve everything from their energy resources to their health care systems. They will be in need of technological expertise, which a number of contractors will be more than happy to provide.

In the past year alone, there has been a significant increase in IT contractors who have opted to pursue government projects on the local and state level. The proportion of companies moving toward this practice has jumped from 29 percent to 48 percent during this time.

Budget cuts may be repealed
Although it is always better to develop backup plans when facing economic uncertainty, IT contractors may be making all of these efforts in vain. According to Inc. Magazine, the budget deal currently underway could render some favorable results for tech companies and their employees. With this agreement, funds could be freed up by repealing cuts made during the sequestration, giving the government the ability to finance more contracts.

The biggest recipients of federal funds are expected to be organizations in the tech and fiber security fields, helping many IT professionals land contracts.

Marie is a writer for CIOs.com. She has an educational background in languages and literature. She covers IT trends and executive technology management topics for the company.